(Updates with Putin's arrival, Bush quote)

By Caren Bohan and Oleg Shchedrov

KENNEBUNKPORT, Maine, July 1 (Reuters) - President George W. Bush sought to rekindle the rapport he once had with Vladimir Putin on Sunday, as he hosted the Russian president at his family's oceanfront home for talks on Iran, a proposed U.S. missile shield and independence for Kosovo.

A few hours before Putin arrived, more than a thousand protesters rallied near the Kennebunkport summer house of Bush's father, former President George H.W. Bush, to vent anger over the Iraq war and U.S. foreign policy.

Ties between the United States and Russia have become badly frayed over issues such as a U.S. plan to base a missile shield in Eastern Europe and Washington's accusations that Russia is rolling back democratic reforms.

The flare-up of tensions has evoked comparisons to the Cold War, but the invitation to Putin to visit the century-old Bush family mansion was seen by analysts as a sign Washington was serious about getting the relationship back on track.

Aides to Bush and Putin have gone to some lengths to emphasize the meeting was informal and have discouraged expectations of breakthroughs on difficult issues.

"We're very casual here," Bush told reporters as he greeted Putin in the driveway of the stone-and-shingle mansion overlooking the rugged Maine coast.

After Bush quickly showed his guest to his quarters at the Walker's Point compound, the U.S. president, his father and Putin immediately boarded a fishing boat and roared out into the cove.

Lobster on the half shell was on the menu for dinner later.

Putin's invitation to the Kennebunkport compound marks the first time Bush has hosted a foreign leader here and the presence of the president's father lends added prestige.

POLICY TALKS ON MONDAY

Indicating he appreciated the warm welcome, Putin presented bouquets of flowers to Bush's wife, Laura, and his mother, Barbara. Bush and Putin are to hold their policy talks on Monday, followed by a news conference.

Bush famously said in 2001 that he trusted Putin because he had gotten "a sense of his soul."

But recent harsh rhetoric from Putin, who has used Russia's energy wealth to reassert its world status, including a comment in which he seemed to compare U.S. foreign policy to that of the Third Reich, has fueled concern in Washington.

As Putin flew across the Atlantic earlier on Sunday, protesters descended on the Kennebunkport resort town seeking to remind Bush of public opposition to the Iraq war.

Taking advantage of blanket media coverage of the summit, some 1,500 demonstrators marched along Ocean Avenue toward the Bush estate, banging drums and chanting "impeach W, impeach Cheney too."

A carnival-like atmosphere prevailed. One woman donned a red gown, tiara and pearls to impersonate a "billionaire for Bush." Some protesters pulled a wooden coffin with a statue of liberty inside it.

"I'm sick of the war," said Mike Miles, 55, dressed in prison stripes to symbolize what he called "criminal behavior" by Bush and Vice President Dick Cheney. From the side of the road, a few dozen counter-demonstrators waved American flags and chanted "USA, USA, USA."

Though Putin has been among the most outspoken international critics of Bush's Iraq policy, the war is not expected to figure prominently in talks during his visit, which will last less than 24 hours.

(Additional reporting by Matt Spetalnick and Oleg Shchedrov)

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